Google’s advancements in artificial intelligence are projected to enhance its second-quarter earnings, according to analysts from Wedbush, J.P. Morgan, and Bank of America. The parent company, Alphabet, is expected to announce its earnings on Tuesday after market close.
Analysts from Bank of America, Justin Post and Nitin Bansal, have increased their revenue forecasts for Google, highlighting the positive impact of the integration of Gemini into Google Cloud and AI features in Google Search. They noted that the expanded use of AI tools would likely stimulate increased activity in Google’s core Search business, despite some initial setbacks and public critique over AI overview inaccuracies. They have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, significantly aided by its AI initiatives, leading to a surge in its stock price and a market valuation exceeding $2 trillion, putting it alongside tech giants Apple, Microsoft, and Nvidia.
The company’s robust quarterly performance followed extensive launches of new AI products under its Gemini AI suite. At the recent Google I/O developer conference, Google introduced innovative tools, including a universal AI assistant designed to interact through users’ smart glasses. Google claims that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious stance on the immediate impact of AI Overviews compared to Post and Bansil, he acknowledged that these features could eventually benefit Search revenue. Ives also pointed out that AI is already contributing positively to Google Cloud, predicting a 27% rise in Cloud revenue compared to the previous year.
Similarly, J.P. Morgan’s Doug Anmuth expressed optimism about Google, having included it in the firm’s list of top tech stocks alongside Uber and Amazon. He emphasized the promising advancements in generative AI before the upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current outlook for Google’s AI efforts is optimistic, the long-term effects on sales remain uncertain.